Omnicom Preaches Data And Integration As Hearts & Science Grows Up Fast

omnicom-q3Less than a year old, Hearts & Science, Omnicom Group’s data-driven, integrated agency, has grabbed major accounts from rival holding companies.

With Procter & Gamble and AT&T, the agency gained the two largest media accounts in the world within the first four months of its existence.

Now Hearts & Science is starting to expand internationally, with an office in the United Kingdom and new business pitches in Germany.

“Hearts & Science has a really big, strong base now in addition to P&G,” CFO and EVP Phil Angelastro said Tuesday during Omnicom’s Q3 2016 earnings call.

“A network that’s really 1 year old that’s won the first- and second-largest advertisers in the US as a base [has started] to expand and win business in other markets,” added Omnicom CEO John Wren.

Omnicom’s overall revenue hit $3.79 billion in Q3, a 2.3% increase from the year before. The holding company expects to start generating revenue from AT&T’s account this year but won’t see the financial impact from its new Volkswagen and McDonald’s accounts until 2017.

Wren attributed Hearts & Science’s successes, along with PHD’s win of Volkswagen’s global media account and DDB’s score of McDonald’s, in large part to its home-grown data and analytics practice, Annalect.

“Underpinning all of this is Annalect,” Wren said. “We built it from within … as opposed to trying to gain this competency through bolt-on acquisitions. The level of collaboration and coordiantion is second to none.”

This vision of a data-first, integrated agency has taken flight across holding companies as advertisers increasingly ask for more transparency, insight and collaboration across disciplines. But aligning financial incentives across agencies that operate on separate profit-and-loss statements will be difficult, said Pivotal analyst Brian Wieser.

“The rebundling of creative and media has gone on in different forms since at least 2003,” he said. “But creating real financial structures and appropriately aligning the financial objectives of management in the agencies is relatively new.”

Wren touted Omnicom’s network of “outstanding talent that can truly work together.” But a breakdown of talent working on these integrated accounts would give much deeper insight into what level integration is actually occurring, Wieser said.

“What percent of the employees working at Hearts & Science on P&G were not previously working on P&G?” Wieser asked. “In other words, how many people did they pull over from Starcom? It’s hard to imagine that there’s a complete reinvention of the wheel.”

Another area Omnicom claims to be reinventing is programmatic, which it is decentralizing in part across its media agency network to diversify client buying options. Omnicom’s trading desk, Accuen, once the agency’s programmatic hub, now operates largely an as an opt-in principal-based buying unit for many clients.

“We can offer clients a bundled product, which has certain guarantees and they know the price and what they expect to get out of it,” Wren said. “Also, through the three media groups we are able to offer them unbundled products where they have a level of transparency.”

Accuen gained $10 million in incremental revenue growth this quarter, down from $25 million in Q1. But that doesn’t mean programmatic spend is down at the agency, Wieser said.

“On the surface that $10 million is low, but we know enough about Omnicom to know there’s a lot of other places where the money could be and we don’t ever get the transparency from the company to identify it,” Wieser said.

Despite continuing to buy as principal through Accuen, Omnicom looks to third-party measurement vendors to prove that clients are getting what they paid for.

“If you provide a service,” Wren said, “you can’t grade your own homework.”

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